Is aid the best way for rich countries to help the developing world?

Barack Obama showed the global leadership expected of him in bringing this
deal to the table and said he was doubling US aid for agriculture. The
question now is how much of the $20bn is really new money? We’re still
pushing governments to clarify where the funds will come from.

A welcome point about the food security deal is the emphasis it puts on making
aid for agriculture more streamlined and effective. There have been hugely
positive developments in the past decade, with smart aid being channelled in
support of improved leadership in developing countries. The old clichés of
aid propping up corrupt dictators no longer hold true.

The field of agriculture has seen some impressive results. The Alliance for a
Green Revolution in Africa (Agra) is an initiative funded by international
donors including the Bill and Melinda Gates Foundation and the Rockefeller
Foundation. It has been working to boost agricultural productivity in Africa
by training smallholder farmers, supporting the development of high-yielding
seed varieties, and ensuring that farmers have access to good quality seeds,
tools, and fertiliser. Since 2006, Agra has trained and certified more than
5,000 new agri-dealers and aims to reach 9,000 by 2011. This is having a
real positive impact on farmers: in 2006 in western Kenya, a farmer had to
travel an average of 17km to an agri-dealer to purchase seeds and
fertiliser; today that distance is an average of only 5km. There are many
more such examples of smart aid and the initiative on food security will
confirm that increasing trend.

And at the G20 summit in Pittsburgh in September, President Obama will get the
opportunity to accelerate what he helped start here in L’Aquila.

The writer is the Europe director of One, the advocacy group co-founded by
Bono

No

Fredrik Erixon

No, it will not matter much for development in poor countries if small and
great powers in the G8 cheat on their Gleneagles pledge to boost foreign
aid. The simple reason is that increasing aid never has been, and probably
never will be, a source of genuine economic growth in developing countries.

If history is our yardstick, aid should be scaled down: not even the greatest
enthusiasts of foreign aid can produce evidence demonstrating beyond doubt
that aid has had a discernible and positive effect on development in poor
countries. In fact, a dispassionate account of evidence from 50 years of
aid-giving strongly suggests that governments should stay away from it.

If the governments of the rich G8 nations were genuinely determined to boost
growth in Africa and other poor regions, a useful first step would be to
stop spraying their own inefficient farmers with subsidies and take away
their tariff protection.

Development is about behavioural change. Countries are poor because they have
economic structures and political systems that reward unproductive economic
behaviour. To grow economically, countries need to reform, root and branch,
their economies.

Time and again we have witnessed the power of economic reforms for
development. When eastern Europe, China, India, Chile and others opened
their economies to trade and investment, and did away with thousands of
regulations that strangled new and old entrepreneurs, growth soared. Such
growth sustains itself. It spurs new wealth and revenues not only at the
time the reforms are implemented but in the following years.

In poor countries that seriously reform economic policy and consequently enjoy
sustained development, aid is unnecessary. At best, it may have only a
marginal effect on development.

On the other hand, in poor countries with political leaders who are unwilling
to change, aid tends to cement bad economic and political structures that
perpetuate poverty. Aid has predominantly been given to the second category
of countries. That is the sad reality.

Fredrik Erixon is the director of ECIPE, a world economy think-tank based
in Brussels

The pledges Gleneagles

*At the G8 summit at the Gleneagles Hotel in Scotland, in July 2005,
leaders agreed to write off the $40bn owed by 18 highly indebted poor
countries to the World Bank, the IMF and the African Development Fund.

*The G8 members from the European Union also agreed at the Gleneagles
summit to reach a collective foreign aid target of 0.56 per cent of their
gross domestic product by 2010 and 0.7 per cent by 2015.

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